Fertilizer industry terms imported gas unfeasible for urea production

The local fertiliser industry has reportedly termed imported gas unfeasible for urea production due to its high cost, reveals official documents obtained from Ministry of Industries and Production (MoI&P). Fertilizer industry gave these views at a meeting of Fertilizer Review Committee to plan availability of fertiliser for Kharif season (April-September, 2015) under the chairmanship of Secretary Industries and Production Arif Azim.

“The committee was of the view that despite buffer stocks, delay in import of 150,000 tons of urea may complicate the situation and lead to fertiliser shortage if there is a surge in demand. Moreover, the surge in demand may itself be fuelled by enhanced demand if imports do not arrive. To a question regarding availability of imported gas, it was explained by the industry that it was not feasible to use imported gas for urea production due to high cost, but could be viable if government agrees to buy urea at import prices,” the documents further disclose. The Economic Co-ordination Committee (ECC) of the Cabinet in its recent meeting accorded approval for allocation/release of foreign exchange by the Ministry of Finance for import of another 50,000MT urea out of the total quantity of 250,000MT approved by the ECC earlier this year to guard against any shortage in the country. The import is being carried out by the Trading Corporation of Pakistan (TCP).

During discussion on urea import proposal, Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi offered gas for local production and promised to submit proposal to the ECC. Local fertiliser industry has increased urea prices owing to recent increase in gas price in accordance with an agreement with the International Monetary Fund (IMF). Ministry of Industries and Production had prepared a summary on September 1, 2015, just a couple of days later after the Minister left for an official visit to Turkey.

According to the summary seen by this scribe, Secretary Industries Arif Azim wrote on the summary that the Minister for Industries and Production is presently on official visit abroad and this summary is being submitted directly. Secretary Industries in the summary said the ECC in its meeting on April 23, and May 21, approved import of 100,000 tons and 150,000 tons urea fertiliser respectively for Kharif season 2015, to bridge the demand-supply gap in the country. A quantity of 100,000 tons was to be imported by TCP through international tenders whereas best possible credit line was to be identified by the Economic Affairs Division (EAD) and Finance Division on May 27, for import of 150,000 tons of urea by tapping the SABIC facility. In keeping with ECC”s decision of April 23, 2013, 100,000 tons urea was imported by TCP through international tender.

A formal request from EAD to Saudi Fund for Development (SFD) for SABIC facility was made on July 7, 2015. During the Fertilizer Review Committee”s meeting, EAD”s representative revealed that a period of at least three months is required for finalisation of agreement with SFD to avail SABIC facility for import of fertiliser.

The meeting decided that import of urea fertiliser should not be delayed to ensure that there is no shortage of urea fertiliser in the market. The Ministry accordingly informed Finance Division of this position on July 3. Thereafter, EAD was apprised that the Saudi facility can be utilised for urea required for Rabi 2015-16. TCP, was, therefore, requested to make necessary arrangements for import of 150,000 tons of urea fertiliser through international tenders, which are presently under process.

Secretary Industries further stated in the summary that since the decision to import 150,000 tons of urea fertiliser by TCP through international tender was taken to avoid possible shortage of urea in the market, ECC may grant ex-post facto approval to the proposal.



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